Hedge fund manager Whitney Tilson of T2 Partners is famed for his regular Value Investing Congress.
However, you may be more familiar with him as the money pro who shorted the housing sector ahead of the subprime crisis. Ever since, the Street has been interested in his current short positions. And Tilson, who is also a CNBC Contributor, tells us one of his shorts, about which he feels most confident, is LuLulemon.
(If you're looking for Tilson's long-term buys, click here.)
Lululemon
“The key thing when you short is to make sure you’re not wrong on the fundamental intrinsic value,” he says.
And even though Lululemon has gained substantially he thinks it’s only a matter of time before the momentum runs out.
“We’ve gone back and we did the work again,” he says. “It’s a fine company – but we’re short because it’s trading at 10.6 times sales – and 41 times earnings – and operating at 20% net margins.”
He goes on to say historically, in retail, those metrics don’t add up.
“We’re staying with the short – mathematically I feel almost certain that a company this overvalued will reward on the short side.”
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Groupon and LinkedIn
Tilson is also short Groupon and LinkendIn.
“This is a classic fad/slash speculative stock market bubble,” he says. “There’s a real company in Facebook and then a lot of pretenders riding their coat tails.”
Part of his bearish thesis stems from a belief that bulls think these companies warrant Facebook metrics.
“Investors are using the $100 billion expected for Facebook as a benchmark, and then reasoning that these names are cheap. That’s just silly.”
“LinkedIn is a good business but at 16.5 times revenues and a $10 billion market cap it’s overvalued,” Tilson says.
“And as for Groupon, I subscribed and it feels like spam to me and I don’t see any real barriers to entry. There’s some value but it’s way south of where the stock is now.”
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GreenMountain
Tilson has been bearish on Green Mountain for quite some time and despite recent gains he remains skeptical.
“We’re still short because if you look at sell through data – it is not showing the unbelievable sales that Green Mountain is reporting – inventories didn’t come down as much as I would have expected them to.”
Also he feels the Street isn't factoring in a big headwind.
“The patent on their K-Cup products goes off and there will be a lot of competitors.”
Tilson sees the situation as comparable to the situation faced by Pfizer as Lipitor comes off patent. “When the drug comes off patent, pricing goes down and the stock reflects the change,” he says.
“But in this case, Green Mountain is spinning a story that when the patent comes off they won’t see a decline in market share – and that’s just silly.”
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Trader disclosure: On Feb 16, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova is long HPQ; Terranova is long IBM; Terranova is long OXY; Terranova is long SBUX; Terranova is long MSFT; Terranova is long YUM; Terranova is long VRTS; Terranova is long MCD; Terranova is long EMC; Terranova is long SWN; Terranova is long LQD; Terranova is long TBT; Terranova is long FXE
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Rohit Thapliyal, Associate, holds a derivative position in the securities of Amazon.com Inc.
A member of the household of Wenge Yang, Associate, holds a long position in the securities of eBay Inc.
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Within the past 12 months, Citigroup Global Markets Inc. or its affiliates has acted as manager or co-manager of an offering of securities of Google Inc, Groupon, Inc.
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